NZ export log prices rise, domestic market strong

Monday 21st November 2016

New Zealand export log prices rose for a third straight month in November, aided by low shipping rates and demand from China, the country's largest export market.

The average wharf gate price for New Zealand A-grade logs advanced to $117 a tonne in November, from $113 a tonne in October, and ahead of the $92 a tonne recorded in November last year, according to AgriHQ's monthly survey of exporters, forest owners and saw millers.

Forest products are New Zealand's third-largest commodity export group behind dairy and meat products, and returns to New Zealand growers are influenced not only by demand in overseas markets but also the relative cost of shipping and fluctuations in the exchange rate. China's appetite for logs is holding at a positive level, aided by lower inventory levels and demand from the country's construction sector, according to AgriHQ's latest monthly report.

"Exporters have continued to find firm interest from Chinese buyers through the past month," AgriHQ analysts Reece Brick and Shaye Lee said in their report. "Port-level inventories indicate that any downwards movement in CFR (cost-and-freight) pricing through into next year is unlikely."

Chinese housing data showed the average price of a newly built home rose 11.2 percent in September, the strongest growth since those records began in 2011, and ahead of August's 9.2 percent pace, the report said, although it indicated the pace was likely to slow as new regulations bite.

"The continued surge in property prices has led to the authorities imposing further tightening measures, effective from October," the report said. "This is likely to have caused potential buyers to rush in to make last-minute purchases before the new measures became effective, adding to the surge in prices."

While the effect of the cooling measures is yet to be reflected in the data, there are reports of property sales volumes already declining in major cities, the report said.

Shipping rates have "nudged up a little" but remain lower than any month through 2015, as continued excess shipping capacity and lower crude oil prices help keep rates subdued.

Meanwhile, the average wharf gate price for pruned logs advanced $4 to $163 a tonne, although younger, bark-on logs were fetching as little as $130 a tonne due to problems with sap staining, AgriHQ said.

In the domestic market, construction activity is boosting demand for structural logs, with the price for S1 logs hitting the highest level since mid-2014.

"The New Zealand forestry industry is continuing to enjoy a spell which has regularly been described as the strongest in at least 20 years," the report said. "The booming housing construction industry has kept demand from mills very firm, especially for structural logs.'

Structural S1 logs lifted to $117 a tonne from $115 a tonne, and the Nov. 14 earthquake and subsequent road closures had caused some logistical issues which would add to supply pressure in the South Island, it said.

Meanwhile, round-wood held at $83 a tonne, the highest level since July last year, and demand from the dairy sector may lift in the future as farmgate milk prices rise, AgriHQ said.

BusinessDesk.co.nz

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